ARTICLE VII: 2013 REVISIONS TO SC TRUST CODE Lynette Rogers - PDF document

ARTICLE VII: 2013 REVISIONS TO SC TRUST CODE Lynette Rogers Hedgepath The Hedgepath Law Firm, P.A. lynette@sccoast.net (11 PARTS) Though the Trust Code is a large portion of Title 62, few changes were made to the substantive provisions. Most of the changes consisted of changes and updates to the Comments. This was necessary in order to remove incorrect or inaccurate references and discussions concerning the Uniform Trust Code. The changes made provide clarification specifically to the South Carolina Code. However, one major addition to the Trust Code is the inclusion of “Unitrust” provisions. Part 1 Section 101 through 112 : Definitions were added for the terms: Permissible Distributee: any person who or which on the date of qualification as a beneficiary is eligible to receive current distributions of property of a trust from a trustee, other than as a creditor or purchaser. Trust Investment Advisor: a person, committee of persons, or entity who is or who are given authority by the terms of a trust instrument to direct, consent to or disapprove a trustee’s actual or proposed investment decisions. Trust Protector: is a person, committee of persons or entity who is or who are designated as a trust protector whose appointment is provided for in the trust instrument. Of course, the terms and definitions contained in the Probate Code that do not conflict with the terms defined in the Trust Section remains in effect for the Trust Code. Part 2 Sections 201 through 204 : Provide that the internal affairs of trusts are formal proceedings unless a consent petition is offered. Prior Code merely provided that if a court finds that, in the interest of justice, a proceeding or file concerning a trust should be in another court in South Carolina, the court making the finding may transfer the proceeding or file to the other court. Amendments provided that probate court proceedings concerning the internal affairs of trusts are formal proceedings unless a consent petition is offered. Provisions are added to clarify what procedures apply to proceedings that affect trusts when a transfer of venue or recusal of a probate

judge is ordered. As with probate matters, a transfer of venue order requires subsequent proceedings affecting a trust to be held in the new county, while subsequent proceedings of a trust continue in the original county when a probate judge is disqualified or recused. “I f a court transfers venue of a proceeding concerning a trust to a court in another county, venue for that proceeding, and any subsequent matters concerning that proceeding, including appeals, shall be retained by the county to which the venue has been transferred. ” “I f a probate court judge is disqualified from matters concerning a trust proceeding, and venue has not been transferred to another county, a special probate court judge appointed for that proceeding has all of the powers and duties appertaining to the probate court judge of the county where the proceeding commenced, and venue for any subsequent matters concerning that proceeding, including appeals, remains with the county where that proceeding or file commenced. ” Part 3 Sections 301 through 305: - No Changes Part 4 Sections 401 through 418: Major change was that a settlor may sign a trust instrument or have someone sign it by a settlor’s direction in the settlor’s presence. Otherwise the section remains the same addressing the requirements of a trust. Part 5 Sections 501 through 507: These provisions, concerning a creditor's claim against a settlor, contain basically stylistic changes and state that a contribution to an inter vivos marital deduction trust as described in Section 2523(e) of the Federal IRC, after the death of a settlor's spouse, is considered to be a contribution by the spouse rather than the settlor. Part 6 Sections 601 through 607: Amendments give an agent acting under a power of attorney certain powers for both revocable and irrevocable trusts, for the revocation or amendment of a revocable trust, but only to the extent expressly authorized. Other provisions contain mostly stylistic changes. Part 7 Sectons701 through 709: No changes to these sections.

Part 8 Sections 801-819: The provision concerning the duty of a trustee to report makes the duties under this section owed only to the settlor rather than to qualified beneficiaries for revocable trusts, and it adds requirements for notifications and distributions. Another new provision gives a trustee discretionary authority to appoint the trust property in favor of another trust for the benefit of one or more of the beneficiaries - what is called a decanting power. The trustee is able to create this second trust regardless of any need to distribute principal or income. The second trust may be created under the same trust instrument as the original or under a new instrument and the trustee may be the same as the original or a new trustee. The second trust is subject to many requirements. One additional provision allows greater flexibility with regard to notices and sending documents, in case of unforeseen circumstances or drafting error. There are also provisions concerning the powers and decisions of a Trust Protector and a Trust Investment Advisor (TIA). Part 9 Sections 62-7-901 through 62-7-933: Appropriate comments to the various sections are now added throughout. When the General Assembly enacted South Carolina's versions of the Uniform Principal and Income Act and the Uniform Prudent Investor Act, both of which are contained in Part 9, no comments were included. Provisions concerning a trustee's power to adjust now recognize a trustee's power to convert a trust into a unitrust, so long as an extensive list of requirements are met. In addition, the SC Uniform Prudent Investor Act has a prefatory note and comment added, and the section adds labels to the subsections to make the section easier to navigate. The section continues to provide for the Prudent Investor Rule, the standard of care, portfolio strategy, and other investor guidelines. This act also includes all of the provisions that were enacted in 2012, as part of Act 204, S. 429, that assists surviving spouses to better manage tax considerations for trust assets. Part 10 Sections 62-7-1001 through 62-7-1013: New provisions allow a trustee to follow the direction of a trust protector or a Trust Investment Advisor (TIA), pursuant to certain restrictions, and generally protects the trustee from liability as a result of the reliance. Part 11 Sections 62-7-1101 through 62-7-1106: The only changes to these sections are stylistic.